Mortgage Rate News

For the second week in a row, mortgage interest rates are dropping. This is good news for would-be homebuyers who have had to contend with higher interest rates, even as the mortgage market stagnates. This could also be good news for mortgage lenders, who have been giving out fewer loans. Lower mortgage interest rates could lead to an increase in loans given out.

Lower interest rates save you money when financing your mortgage

Interest is the money you pay for the privilege of borrowing. When financing your mortgage for a home purchase, you interest charge is simply money that goes straight to the bank. You do not see any benefit from that portion of your mortgage payment.

The higher your interest rate is, the more money goes to the mortgage lender. This means that you pay more money when mortgage interest rates are higher. For a home that costs around $200,000, spread out over a period of 30 years, a 1% difference in mortgage interest rates can mean a difference of tens of thousands of dollars that you pay extra to the mortgage lender.

Lower mortgage interest rates dropping can make things more affordable for homebuyers. And that is important right now. It can make it easier for buyers to get home mortgage loans on foreclosures (which are becoming sought after by buyers and investors alike) right now.

How long will mortgage interest rates stay low?

Even though mortgage interest rates are dropping right now, things could change next week. Mortgage rates have been volatile, and Realtor.org reports that there could be reversal of the current trend:

Amid the nervousness, mortgage rates touched lows not seen since the first week of June. But inflation remains an issue, as evidenced by the Consumer Price Index for June, and will continue to spar with weak economic growth as the factors influence the direction of mortgage rates. The up and down yo-yo of mortgage rates seems likely to continue, with rates fluctuating within a range.

Tags: mortgage interest rates, mortgage rates drop, home mortgage loans, mortgage lenders,
homebuyers

There has been plenty of partisan wrangling over the housing relief bill currently making its way sluggishly through Congress. And there has been disputes between Congress and the White House. Now, though, a solution may have been found. Fannie Mae and Freddie Mac may actually get the housing relief bill through weeks ahead of when it could reasonably be expected otherwise. The Los Angeles Times reports on how the recent debacle with Fannie and Freddie may influence the housing relief bill:

The mortgage initiative unveiled Sunday by the Treasury Department and the Federal Reserve — which is designed to bolster confidence in home-loan giants Fannie Mae and Freddie Mac — requires approval by Congress. To expedite the legislative process, it is being attached to the larger housing bill as an amendment.

And, since no one wants to be accused of holding up the Fannie-Freddie package, differences are being swept aside over the larger measure to help some homeowners threatened by foreclosure.

In an election year, with the economy and the US financial system practically in ruin, nobody wants to hold this up. The collapse of liquidity for Fannie Mae and Freddie Mac could bring about the complete dissolution of the mortgage industry — that’s how influential the two government chartered institutions are. And how much money goes through them.

Besides, after Ben Bernanke’s testimony before Congress this morning, legislators are probably chomping at the bit to do something that they can claim will set the economy on the road to recovery. Bernanke gave is most pessimistic speech yet, turning directly from his optimistic statements weeks ago that the worst was over for the US economy. Now he’s all about uncertainty and expressing worries that there are hurdles he didn’t foresee to economic recovery.

Tags: Ben Bernanke, Housing Relief Bill, home mortgage loan, Fannie Mae,
Freddie Mac, mortgage loan blog, economy

It’s been a busy weekend for the Federal Government. It’s been taking over IndyMac and working out how to save Fannie Mae and Freddie Mac from complete insolvency.

Fannie Mae and Freddie Mac to receive bailout

One of the pieces of news that its helping the stock market, the US dollar and even Treasuries all rebound from dismal performances on Friday is the announcement, over the weekend, that Fannie Mae and Freddie Mac can count on the Federal Government. The government gave itself the power to do the following for the two embattled mortgage lenders:

• Purchase equity in the companies.
• Increase lines of credit offered to the companies.
• Make emergency loans (via the Federal Reserve) to the companies.

At the same time, though, government officials made it abundantly clear that their largess is only directed at the two government chartered mortgage lenders; no one else should expect such a bailout at taxpayer expense. (Although, you never know when this administration’s government agencies will intervene to keep big business going.)

The moves should ensure that Fannie Mae and Freddie Mac both have capital enough to keep things liquid and functioning, helping them avoid the fate of IndyMac.

IndyMac reopens today as IndyMac Federal FSB

On Friday, the government announced that it was closing down IndyMac, one of the largest mortgage lenders in the country, and taking it over. The bank is reopening today, if the firm charge of the FDIC, which hopes to find a buyer for the distressed bank. The Financial Post reports on the reason that IndyMac folded:

“IndyMac is a company that was pretty much 100% invested in mortgage assets, and we’re in a bad mortgage market, and it had no capital. It’s not complicated,” said Adam Compton, co-head of global financial stock research at RCM in San Francisco, which manages about US$150-billion.

Too bad IndyMac didn’t have the same government charter that Fannie and Freddie do.

Tags: IndyMac, Fannie Mae, home mortgage loan, Freddi Mac,
mortgage lenders, mortgage loan blog, FDIC